Brexit Agreement: A Deal Between German Manufacturing and UK Finance Sectors

November 15, 2018

Series Content

As Britain’s Theresa May inches closer towards a final Brexit agreement, for leaving the European Union, behind the scenes it is not quite the compromise politicians and the media make it out to be, says economist John Weeks

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Story Transcript

GREG WILPERT:It’s The Real News Network, and I’m Greg Wilpert, coming to you from Baltimore.

The Cabinet of Britain’s Prime Minister Theresa May approved a 500-page document on Wednesday detailing the agreement under which the United Kingdom will leave the European Union; a process commonly known as Brexit. It has been over two years since the British public voted in a referendum in favour of leaving the European Union; however, leaving the EU entails countless consequences for individuals, businesses, and institutions, both in Britain and in the EU. The vote sparked an extended period of uncertainty and controversy. As a matter of fact, shortly after the referendum vote, then-Prime Minister David Cameron resigned and was replaced by Theresa May. During the Brexit negotiations, seven cabinet members resigned one by one in protest over what they consider to be a disastrous deal. And shortly after last Wednesday’s cabinet approval, two more cabinet ministers resigned. Britain’s pound sterling subsequently dropped by two percent in value as markets reacted to the turmoil on.

The Brexit agreement now goes to Parliament and to the European Commission, which is scheduled to vote on it on November 25. The EU’s chief Brexit negotiator Michel Barnier praised the deal and explained that it was the fruit of joint negotiations.

MICHEL BARNIER:The two negotiating teams have taken their responsibility. The British government has taken today, this evening, its responsibility. And now everybody on both sides have to take their responsibility.

GREG WILPERT:Joining me now to make sense of the latest Brexit developments is John Weeks. John is professor emeritus of the School of Oriental and African Studies at the University of London. Also, he’s author of the book Economics of the One Percent: How Mainstream Economics Serves the Rich, Obscures Reality, and Distorts Policy. Thanks for joining us today, John.

JOHN WEEKS:Thank you for inviting me.

GREG WILPERT:So the Brexit agreement, which few have actually had a chance to read, is divided into three main parts, apparently; a financial settlement for the separation, the rights of British citizens living in the EU and of EU citizens living in Britain, and then the third part is about a mechanism for the border between Ireland, which is in the EU, and Northern Ireland, which is part of the UK.

So let’s start with the last point. Why has the border between Ireland and Northern Ireland become such a key stumbling block in the negotiations, and what do we know of the agreement now regarding the border?

JOHN WEEKS:Well, the … As you said, the vote on Brexit was over two years ago. And at that time Northern Ireland, which is part of the United Kingdom, part of the greater Britain, you might say, voted overwhelmingly in favor of remaining in the European Union. Ireland the country, or Eire, which is its formal name in Irish, is a member of the European Union.

So were it the case that Britain were to leave the European Union, and Northern Ireland were to leave the European Union, and not have an arrangement for trade, it would mean you need some kind of border between Northern and Southern Ireland to check goods coming across, to see if they satisfied certain health and safety rules of the European Union.

The importance of that is that, as probably many of your watchers know, for decades there was an active war going on in Northern Ireland which was supported by the government of Southern Ireland, to various degrees. Supported by the government of Ireland, I should say. Then several years ago, a peace arrangement was reached. And part of that peace arrangement was an open border.

So the arrangement in which all the British Isles would leave the trading arrangement with the European Union would appear to contradict the peace agreement between Northern Ireland and Ireland. Having said that, let me say I think that that is a problem that has been, for political reasons, blown out of proportion. I think there was always a solution to it, and they’ve come up with the obvious solution; they postponed it. But politically it was extremely important. Much more important, I think, than its practical consequences. I mean, in fact, there will be very few customs checks between Britain and the European Union in any case. But that problem has basically been resolved. We’ll discuss that more as we go into the other two parts.

GREG WILPERT:Yes. The British business community seems to be reacting favorably to the agreement. Of course, that involves the tariffs and the customs union issues. The Confederation of British industry, as a matter of fact, called it stepping back from the cliff edge. What scenario scared the British business so much, and why does this agreement appeal to them?

JOHN WEEKS:I know this is going to seem very strange to non-British listeners. In June of 2016 was the vote against remaining in the European Union. In April- well, actually, in March 2017, last year, the British government, Theresa May’s government, voted, put a vote through the House of Commons, to initiate the withdrawal process. That colloquially- it refers to, it’s always called Article 50. That’s in the European treaty.

OK. So, Article 50 set a date in those discussions of two years. Those two years come up next March 29. OK. So that’s not what’s pushing this. Now, all during that process it was clear- when I say all during that process, ever since the two-year deadline was set- it became obvious, I think, to any dispassionate observer that an agreement was possible, that the agreement would be pretty straightforward, and there were just a number of little details that could be very important to a particular country to sort out.

The tremendous amount of political tension grew up around it. I mean, the media coverage or Brexit, both the right-wing press and also the left-of-center press, the Guardian, have involved just terrible distortions. You would have thought it was a morality play going on; that leaving the European Union would result in Britain, you know, completely collapsing as a country; that staying in the European Union will lead to a loss of sovereignty, and so on.

But the reality was it was a pretty straightforward agreement. And that agreement is one the business community wanted. They have helped design this. I mean, the fact of the matter is this agreement is brought about by two major parties, or two major players, if I can use that cliche. German manufacturing capital, which wants to maintain access to the British market. German manufacturing runs a tremendous trade surplus with Britain across the board. That’s what’s- that’s the big player on the continent that want to sort out this agreement. And the big player in Britain that want to sort it out is British financial capital. So they didn’t really care what happened with the trade in goods. What they wanted was to be able to maintain their access to European financial markets so that what’s called the City of London, which is where all the big banks are, so that the City of London would be able to maintain its premier position in world financial markets.

So that’s really what the negotiations were about. It was pretty clear from the beginning that both the City and German manufacturing capital would come to an agreement, and everybody else would have to fall into line. So these two big players, German manufacturing capital and British financial capital, they were going to bring the government of Ireland in line. The government of Ireland is deeply indebted to German banks. The idea that they could hold out over the border issue was ridiculous. Serious issue about the Irish border is that in Northern Ireland, the extreme right-wing party which holds most of the seats there supports Theresa May’s minority government. So Theresa May, over the Irish border issue, was really not negotiating with the European Union. She was negotiating with this far-right party which was part of her coalition.

GREG WILPERT:Now, the positions of both the left and the right in the UK have been rather blurry about Brexit from the start. But proponents of Brexit were generally from the populist right. In contrast, the Labour Party has not taken a very strong position on Brexit. And actually, recently May leaked- Theresa May leaked one key detail from her Brexit plan, which is that it will, quote, “stop unlimited immigration,” as she put it. So this seems to be an appeal to right-wing voters. Now, does the deal actually have anything for the left or for progressives or the Labour Party to like?

JOHN WEEKS:First, let me say that it does appear from the- as you said, this document, withdrawal document is almost 600 pages. Needless to say- and it was just released last night. So needless to say, I have not read 600 pages. But I have read the sections on that, on the question of immigration. And it does appear that the European Union has conceded to the British government that it does not have to accept freedom of movement of EU nationals, so that the British government in the future under this agreement will be able to restrict European Union citizens by continent, citizens from the continent, coming in and out of Britain.

So that big issue was dealt with. As you say, that was part of the, I would say, really neofascist right. And racist right, too. That was their big issue in Brexit. And pretty much they achieved that. Again, that’s an issue that wasn’t that important, either to the German manufacturing capital- I mean, I testified at a committee of the Bundestag, German Lower House of Representatives, a year ago, and I happened by chance to sit next to the head of the German Confederation of manufacturers. And he said in his statement, just before mine, he said we should be able to sort out the question of free movement. In other words, it didn’t make any difference to him; as long as he could export all of those machine tools and automobiles to Britain, what did it matter if Europeans move around Europe?

People must realize that while this is all presented it’s a morality play it was a pretty dirty deal on both sides. I mean, Banier, who you quoted; you know, you read some of his statements. Banier was very much, is an opportunist politician. He wanted to be the head of the European Commission. He wanted to follow Juncker as head of the Commission. All of his public negotiating and apparently strong stands, and how I’m going to stand up for the European Union, was all aimed at that election. And then Merkel pulled the rug out from under him and says, sorry, I’ve got another candidate. And we were never going to support a fringe candidate, which probably [inaudible].

Now, going to them [to show] that it was not the case that you had this venal British government- though venal it is- confronting a well-organized, clear, relatively virtuous European Union. The European Union negotiators, they were the loyal representatives for Merkel’s government, and she was a loyal representative of the big capital in her country.

GREG WILPERT:OK. Well, we’re going to have to leave it there for now, but I’m sure we’ll come back to you as we see how the process develops from here on out, especially considering that the cabinet and the government seems to be in turmoil. And we’ll see what happens very soon.

JOHN WEEKS:If I could just say, you’re absolutely right. In the next few days Parliament may vote on that agreement, and that could lead to a historic rupture in British politics.

GREG WILPERT:All right, so I’m sure we’ll come back to you then. I was speaking to John Weeks, professor emeritus at the School of Oriental and African Studies of the University of London. Thanks again, John, for having joined us today.

JOHN WEEKS:Thank you very much.

GREG WILPERT:And thank you for joining The Real News Network.

Related Bios

John Weeks is Professor Emeritus and Senior Researcher at the Centre for Development Policy and Research, and Research on Money and Finance Group at the School of Oriental & African Studies at the University of London.

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